SBA Attempts to Minimize Diversion of Billions In Small Business Contracts to Corporate Giants

The American Small Business League dropped the following press release this morning. In it the league points to the Small Business Administration's efforts to spin a recently released Washington Post study in a positive light. However, as the ASBL points out, the SBA failed to recognize the fact that the Washington Post's Study only considered a sampling of $13 billion in contracts, finding that more than 5 billion went to firms that were clearly large. That's nearly 40 percent going to large businesses as opposed to small businesses.

SBA Attempts to Minimize Diversion of Billions In Small Business Contracts to Corporate Giants

SBA Tries to Conceal Magnitude of Diversion of Billions in Small Business Contracts to Fortune 500 Firms

Petaluma, Calif. - Yesterday, the Small Business Administration (SBA) distributed a press release attempting to characterize the recently presented findings of a Washington Post study as proof that only a small portion of federal small business contracts are diverted to large corporations. However, in its release the SBA failed to recognize that the Post's study determined that the government had awarded more than $5 billion in small business contracts to large corporations from a sampling of only $13 billion in contracts. According to the Post's findings, nearly 40 percent of the small business contracts they analyzed went to large corporations.

In July of this year, the SBA used the same technique in an attempt to counter an investigation by the Department of Interior Office of Inspector General (DOI IG), which found that the DOI had misstated the achievement of its small business goal by including Fortune 500 firms. (http://www.doioig.gov/upload/2008-G-0024.pdf) In its investigation, the DOI IG reviewed 0.3 percent of total contract actions during years 2006 and 2007 and found that over a dozen Fortune 500 firms were coded as receiving $5.7 million in small business contracts. In response to the DOI IG's findings the SBA attempted to characterize the IG's findings as the total amount of small business contracts awarded to large businesses.

The SBA has a long track record of attempting to misrepresent the magnitude of the problem of large corporations receiving federal small business contracts. The SBA has gone so far as to claim that it is a myth that large corporations receive federal contracts intended for small businesses by issuing a press release on the subject. (http://www.sba.gov/idc/groups/public/documents/sba_homepage/news_07-30.pdf)

It is difficult to know exactly how severe the problem is, because the government has extensively modified the data. For example, one study found that 10,000 major contracts were removed from the government's contracting database and contract numbers for 2003 had been concealed. (http://www.asbl.com/documents/fpdsaccuracyletter10000.pdf)

The SBA has fought every effort by the American Small Business League (ASBL) to expose the actual recipients of federal small business contracts. The SBA has fought to the point that in August of this year, officials from the agency attempted to convince a United States District Court judge that the SBA did not have any information indicating the names of firms that had received federal small business contracts for FY 2005 and 2006. After losing the case the SBA has now appealed the District Court's decision to the Ninth Circuit Court of Appeals. (http://www.asbl.com/showmedia.php?id=1150)

In Report 5-14, the SBA OIG found that the SBA itself was reporting awards to large businesses as small business awards. In fact, the SBA was reporting awards to multinational Dutch conglomerate Buhrmann NV. (http://www.sba.gov/ig/8-14.pdf)

The pattern of what the SBA likes to call miscoding is anything but random. One-hundred percent of the time, the miscoding results in contracts meant for legitimate small businesses being diverted to Fortune 500 firms; it's just not believable.

There have now been 15 federal investigations and hundreds of stories in the main stream media exposing the diversion of federal small business contracts to large corporations. Despite all of this, officials at the SBA continue to try to convince the American people that the diversion of federal small business contracts to Fortune 500 corporations is a myth," ASBL President Lloyd Chapman said.